Ireland's economy will return to recession in the second half of the year, but the overall growth rate for 2011 will be higher than expected, a new forecast said.
But Ernst & Young's winter forecast cautioned that uncertainties in the euro zone, the recession in the construction sector and a lack of significant job creation in the economy was leading to a subdued economic mood in the State.
The Republic will not return to peak employment levels until 2030, the report said.
Lower growth prospects for the euro zone, UK and US may also hit Irish exports in the coming months. Ernst & Young downgraded growth prospects in Ireland's export sector for 2012 from 5.1 per cent to 3 per cent
In the first and second quarter of the year, GDP grew by 1.9 per cent and 1.6 per cent respectively, the first consecutivequarters of positive growth since before the credit crisis began.
"Even with the economy forecast to return to recession in the second half of 2011, the strong [first half] performance has been sufficient to lead to an upward revision in the GDP growth forecast for 2011 as a whole," the report said.
"This has provided a much needed welcome cheer in an otherwise still very troubling economic environment."
However, next year will see only 0.5 per cent growth in GDP, while 2013 is expected to see a growth rate of 3.1 per cent. Over the rest of the decade to 2020, growth will average at 4.1 per cent, the report said.
In Northern Ireland and Britain, a combination of domestic challenges, the deteriorating global economic conditions and the ongoing financial market turmoil caused by the euro zone debt crisis has led to the downgrading of outlooks for 2011. According to Ernst & Young the British economy will only grow by 0.9 per cent this year, while the Gross Value Added growth forecast for Northern Ireland is 0.8 per cent.
The State will reach its pre-recession output peaks by 2015, two years after Northern Ireland, Ernst& Young said.
"The road to recovery remains a very long one for the island," the report said.
"The NI economy may not have fallen as far in the recession as ROI’s, but it is set for a slower rate of recovery," the report said.
